Foreign exchanges warned over rates

Foreign exchanges warned over rates
Last Updated : Wednesday 05 Dec, 2007 –
Posted in 7days

The UAE central bank has warned foreign exchange outlets against ignoring the official exchange rate after some raised dirham prices in anticipation of a revaluation. The bank yesterday said it would reimburse customers who had been overcharged, using funds placed with it by the foreign exchange companies themselves.

It had “noticed that some money changers took advantage of the rumours promoted by some speculators and raised the exchange rate of the dirham against the US dollar”, it said in a statement, adding it would “enforce more severe penalties in case of similar violation in the future.” Hotels and money changers in the UAE changed dollars into dirhams at as much as 17 per cent below the official rate in anticipation of a revaluation, an action the bank described as harmful to the country's tourism industry.

Gulf rulers are meeting in Doha amid frenzied speculation that some may drop their pegs to the declining dollar or allow currencies to appreciate. On the first day of the summit, however, the UAE foreign minister told reporters there would be no decision on the dollar peg at the ongoing meeting.

“There is no intention to take a decision at this summit regarding de-pegging the Gulf currencies to the dollar,” WAM reported Sheikh Abdullah bin Zayed al-Nahayan as saying.

Gulf currencies weakened yesterday after Saudi finance minister Ibrahim al-Assaf ruled out dropping his country's peg. Bids on the UAE dirham eased to as low as 3.6715 per dollar after hiting a 17-year high of 3.6561 per dollar last Friday.

Leaders move on but peg stays put

Leaders move on but peg stays put
Last Updated : Wednesday 05 Dec, 2007 -
Posted in 7days

GCC leaders concluded their annual summit in Doha yesterday, having opted to keep their currencies pegged to the sliding dollar for now. “Right now, the policy is to stick to the dollar,” said Qatari prime minister Sheikh Hamad bin Jassem al-Thani. “The GCC is concerned about the [weakening] dollar. No decision on the currency for the moment.”

UAE foreign minister Sheikh Abdullah bin Zayed al-Nahayan had earlier said a decision on unpegging was not on the summit’s agenda. Indeed, the communique issued at the end of the two-day talks made no mention of foreign exchange rates or the dollar’s weakness - but this has done nothing to reassure markets either way and analysts say it suggests a division between nations.

“It’s a sign of disagreement. There could be short-term disappointment in the market,” said Marios Maratheftis, regional head of research at Standard Chartered. Gulf currencies weakened against the dollar following the summit as expectations of a near-term change in exchange rate policy waned. One issue the summit’s final communique did mention, however, was the single currency project, which it said remained on track for 2010.
“The leaders have decided to continue to work towards achieving the monetary union... and confirmed keeping the date of 2010,” said GCC secretary general Abdulrahman al-Attiyah. He said the issue would be discussed at the next summit in Oman, while Bahraini foreign minister Sheikh Khaled bin Ahmed Al-Khalifa said policymakers would meet again to try and agree a common position on currencies.

Forbes urges Gulf to re-evaluate peg

Forbes urges Gulf to re-evaluate peg
Posted in 7days online
http://www.7days.ae/en/2007/11/19/forbes-urges-gulf-to-re-evaluate-peg.html

Calls for Gulf countries to revalue their currencies gained momentum yesterday as American entrepreneur Steve Forbes recommended a one-time adjustment. Speaking at the Leaders in Dubai Business Forum, the editor-in-chief of Forbes magazine advised continuing the peg to the dollar, but to re-evaluate rather than devalue currencies.

“The thing that should not be done now is to allow your currency to float,” he said. “Eventually, and rather than going for a basket of currencies, Gulf countries should do a one-time revaluation and keep it fixed, whether it is 8 per cent, 10 per cent or 12 per cent and then re-peg to the dollar.” Forbes hit out at the US Federal Reserve for inviting the ongoing credit crisis, and called upon Gulf states to act now to correct the Fed’s mistakes and protect themselves from any further depreciation of the dollar.
“Currencies should be stable in value – that’s the first rule. Look at what the Federal Reserve has done in the US. By printing too many dollars and allowing the property sector to build four years worth of houses in two years, it has created a credit crisis.

“Even though the pound, yen and euro have appreciated, they all have inflation. They have all sinned, but the Federal Reserve is the biggest sinner of all,” he said. By re-evaluating, Forbes claimed, Gulf governments would buy themselves time to make a decision over going for a basket of currencies in future.
He also criticised the International Monetary Fund for wrongly encouraging countries to keep their currency values low.